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Funding 501(c)(4)s

Podcast

Leslie Barnes, Natalie Roetzel Ossenfort, Tim Mooney


 

We sometimes refer to 501(c)(4)s are the multitools of tax-exempt organizations because they can advocate in so many ways. But because they can engage in partisan political activity, they aren’t as easy to fundraise for… but that’s where this podcast steps in! On this episode, we cover the ways to fund a 501(c)(4) and why it’s something all funders should consider to achieve their policy goals.   

Our Attorneys for This Episode:

Natalie Roetzel Ossenfort Leslie Barnes Tim Mooney

It’s harder to fund a (c)(4) compared to a (c)(3). Why? 

  • Individuals cannot deduct contributions from income tax  (that’s why disclaimers required notifying donors that contributions are not tax-deductible) 
  • Foundations can only fund what they can do themselves (rules are more restrictive for private foundations that for public foundations)
    • Both prohibited from funding partisan political activities
    • Ability to fund lobbying varies based on type of foundation 

Why fund a (c)(4)? 

  • They can do more in relation to the causes you care about  (which may be important if you’re an individual funder) 
    • Unlimited lobbying 
    • Some partisan, political activity (as secondary activity) 
  • They might have better expertise than other orgs 
    • Subject matter experts, staff 
  • Bigger impact in systems change, change the electoral landscape 

How to fund

Individuals 

  • Not many restrictions 
  • Donations not tax-deductible 

 Public charities/Public foundations 

  • Need to restrict funds from being used for partisan electoral purposes 
  • Best to direct how much of the funds can be used for lobbying 
    • By default, grants to c4 are treated as lobbying absent evidence to the contrary (count against grassroots lobbying limit) 
    • Grassroots lobbying grant counts against Grassroots lobbying limit 
    • Direct lobbying grant counts against direct lobbying limit IF you can show that funds were actually spent on direct lobbying (otherwise, default is to count against GR limit) 
    • Can make a controlled grant to avoid having to count the grant against lobbying limits, but this requires grantee to use funds for non-lobbying purposes 
  • Example – Granting unused lobbying capacity 

 Private foundations 

  • Expenditure responsibility grants
    • Requires pre-grant inquiry (develop level of trust with potential grantee to build confidence that grant will be used only for specified purposes.
    • Requires a written, signed grant agreement 
      • Has to restrict lobbying, partisan political activity, voter registration  
      • In most cases, must also restrict grants to individuals
    • Requires grant reports on how funds were spent and progress toward achieving grant objectives 
    • Also can use this rule to fund other non-(c)(3)s. 

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